February 19, 2019 | Category: Background Checks, Compliance

Employers who operate in the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) should take a moment to review their Fair Credit Reporting Act (FCRA) disclosures and authorizations to ensure they are in compliance with the Ninth Circuit Court of Appeal’s recent decision.

FCRA’s Disclosure Requirements

The FCRA requires, among other things, employers who obtain consumer reports (i.e. criminal background checks, credit reports, driving records, etc.) to provide job applicants with clear and conspicuous disclosure in a document consisting solely of the disclosure before they obtain any such report. The disclosure informs job applicants that the employer may obtain such a report, the job applicant’s rights during the process, and get the job applicant’s authorization to obtain such a report.

Gilberg v. California Check Cashing Stores, LLC

Desiree Gilberg applied for employment; completing a three-page employment application. Roughly two weeks after submitting her application, the employer provided Gilberg with a separate one-page document conspicuously titled Disclosure Regarding Background Investigations. The disclosure explained that the employer may obtain a background check; it also contained space for Gilberg to authorize the background check, information about her rights under various state laws (may of which did not apply to her), and other non-mandated disclosures.

She provided her authorization for the background check, which the employer obtained. Gilberg was hired and worked for employer for a period of about five months. After leaving the company, Gilbert filed a class action lawsuit alleging violations of the FCRA (and California’s ICRAA, which has the same requirements).

On appeal to the Ninth Circuit, the focus was on whether the disclosure the employer used satisfied (1) the consists solely disclosure requirement (also known as the stand alone requirement); and (2) the clear and conspicuous disclosure requirement. The Court found that the disclosure violated both requirements of the FCRA.

Consists Solely Requirement

The Court concluded that the one-page disclosure contained unlawful surplus (or extraneous) language, which violated FCRA. Surplus language included: (1) the job applicant’s rights under various state laws (many of which did not apply to her); (2) a notice about background investigations; and (3) a summary of the job applicant’s rights under the FCRA.

The surplus language, the Court reasoned, was just as likely to confuse the job applicant as it was to inform him/her. Therefore, it did not further the purposes of the FCRA (or ICRAA).

The Court notes that the ordinary meaning of solely is “alone; singly” or “entirely; exclusively”. Because the disclosure form does not consist solely of the FCRA disclosure, it does not satisfy this requirement.

Clear and Conspicuous Requirement

“Clear and conspicuous” is not defined by the FCRA (or ICRAA). However, using interpretations from other courts, the Ninth Circuit defined “clear” as reasonably understandable and “conspicuous” as readily noticeable to the [applicant/employee]. Using these definitions, the Ninth Circuit found that the disclosure was conspicuous, but not clear.

The disclosure was conspicuous because it was “readily noticeable” to the applicant through the use of capitalized, bold, and underlined headings — making it easy for Gilberg to see what she was signing.

The disclosure was not clear, however, for two reasons. First, the disclosure contained language that a reasonable person would not understand. Specifically, the Court cites the following language from the disclosure form:

This scope of this notice and authorization is all-encompassing; however, allowing [employer] to obtain from any outside organization all manner of consumer reports and investigative consumer reports now, and if you are hired, throughout the course of your employment to the extent permitted by law.

The Court found that the beginning of the sentence does not explain how the authorization is all-encompassing and the second part of the sentence was incomplete. Due to these flaws, the Court found that the language was not reasonably understandable. Thereby, not meeting the definition of clear.

Second, the disclosure would confuse a reasonable person because the federal disclosure was combined with the applicant’s rights under various state laws. As an example, the Court notes that the disclosure includes disclosures for “New York and Maine applicants or employees only” leading a reasonable person to think that the rights outlined were only available to New York and Maine applicants, which was not the case.

A copy of the Court’s decision, including the disclosure form in question, can be found HERE.

What Employers Should Do

If an employer operates in any of the states that fall within the jurisdiction of the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) , they should review their background check disclosure and authorization forms to ensure (1) there is no surplus language in the disclosure, and (2) the disclosure is clear and conspicuous.